Airbnb Environmental Complexity
#1: List out as many elements affecting your company as you can for each of the sectors below.
Industry (Competitors, industry size, competitiveness, related industries):
The peer-to-peer (P2P) market is relatively new to the internet environment. While Airbnb is currently the giant based on size and financial backing, there are several companies that also have a share of the market. In addition, there are many newcomers that are trying to cash in on the concept including some that have focused on specialized markets such as family friendly, sexual orientation or race.
Significant competitors:
• Tripping.com is not a P2P rental site rather a search engine similar to Hotels.com or
Cheaptickets.com. Their platform has the ability to search multiple booking sites
simultaneously so you can compare prices or locations. They have agreements with
HomeAway, FlipKey, Homestay, Roomorama, Wimdu and numerous others. They have
over 8 million properties in 150,000 destinations. (Chan, 2016)
• HomeAway, acquired by Expedia, is one of Airbnb’s largest competitors with over 1
million listings worldwide servicing 190 countries. They have acquired several other
rental websites including VacationRentals.com and VRBO. Their annual revenues
exceeded $500 million in 2015 and they were valued at $3 billion. (Taylor, 2016) • Homestay focuses on a personal interaction with hosts. Instead of listing a vacant rental, a
guest is booking a room in the host’s home. Hosts are encouraged to list their hobbies and
help with sightseeing. (Timothy, 2017)
• Roomorama makes safety a top priority. They have over 60,000 properties in over 4,000
locations across the world. It is extremely popular in Europe and has a strong presence
amongst business travelers.
• Wimdu has over 300,000 listings in over 140 countries. They are one of the biggest
competitors in the European market. (Techboomers.com, 2017)
• TripAdvisor is the largest, most trusted online travel community which includes reviews
of vacation rentals, restaurants, tours, etc. They acquired FlipKey and several other P2P
sharing sites which is allowing them to evolve to a full-service booking platform.
(Taylor, 2016)
• Please note that there are several other competitors in this market that are not listed due to
size of the firm or their specialized niche did not directly correlate to Airbnb’s overall
mission.
Competitiveness: Airbnb is the current industry leader of P2P sharing sites. While their product is no longer unique, they have been able to capitalize on early marketing strategies. Being at the forefront has enabled them to recruit hosts early on rather than having to compete for listings.
Airbnb has the lowest accumulative costs for their users. They do not charge a listing fee for potential hosts rather their fees are built into a 3% host percentage and a variable guest percentage between 6-12%. (Timothy, 2017)
Airbnb established the concept of P2P home sharing. In the last few years they have expanded to include a charitable foundation, restaurant reservation site, and have purchased several smaller
P2P home sharing sites.
Industry size: Travel and tourism now accounts for 10% of global gross domestic product with
$7.2 trillion in revenue. As the market continues to increase, Millennials and Generation Z have been quick to embrace the home sharing concept. Millennials already account for 60% of
Airbnb’s guests. In addition, the senior population has been their fastest growing demographic.
(Airbnbcitizen.com, 2017)
Airbnb’s website boasts over 3 million listings worldwide, servicing over 65,000 cities and 191 countries. As of 2016, Airbnb listed $1.7 billion in total revenue and $100,000,000 in profits (Tom, 2017) As of March 2017 they have acquired an additional funding now totaling more than
$3 million and valuing the company at $31 billion. (Wikipedia.org, 2017)
Raw Materials (Suppliers, manufacturers, real estate, services):
Suppliers: Since Airbnb does not offer goods directly, suppliers could be considered the hosts who are offering their homes to renters. Airbnb doesn’t necessarily have vendors. They have partnered with businesses such as American Express and Delta Airlines to provide incentives for people to book or host through their service.
Real estate: Airbnb has 22 locations from China to Canada including several in the United
States alone. Their headquarters are located in San Francisco, CA.
Services: Airbnb does not directly offer goods or services to users. They offer a platform which connects individuals who want to transact business with each other. (Nath, 2017) Airbnb helps facilitate rental property via a P2P sharing platform. They recently have begun facilitating
Experiences which enables hosts to offer a travel guide adventure based on the particular region they represent. Experiences focus on Sports, Nature, Entertainment, Food, Arts, or Social Impact type activities. (Airbnb.com, 2017) Airbnb also created mobile applications that can be utilized via iOS or Android technologies.
Human Resources (Labor market, employment agencies, universities, unions):
Airbnb has 18 departments which include Engineering, Data Science and Analytics, Finance and
Accounting, Business Development, Customer Experience, Design, Employee Experience, Information Technology, Legal, Operations, Localization, Marketing and Communications,
Photography, Product, Public Policy, Research, Talent and Trust and Safety. Each department consists of personnel from several different geographic regions. They utilize a matrix structure which has enabled them to work cross departmentally and improve overall communications.
(Airbnb.com, 2017)
In July of 2011, Airbnb had just over 130 employees worldwide. By September of 2011 than number had nearly doubled. By 2015 they had increased to 2,368 employees and as of May 2017 the number has increased to over 3,100. (Quora, 2017) To date they are currently recruiting for over 220 positions. (Airbnb, 2017)
Airbnb has a diverse workforce however they aim to increase its percentages of minorities in the upcoming year. They will focus their efforts on recruiting from historically black colleges as well as schools with large Latino populations. They are also working with a recruiting startup that will source candidates from underrepresented groups and have implemented a new policy that will require women and people of color are included in candidate selection processes for senior positions. Airbnb has continued to address benefits, which is a key recruiting tool. They have enhanced their parental leave program, supported LGBT related policies including domestic partner benefits and transgender-inclusive healthcare and expanded programs that include disabled, immigrant, Native American and Asian populations. (Blog.atairbnb.com, 2016)
Airbnb has also created their own University program, Data University, which consists of programs ranging for the beginner level to 300 level courses which targets engineers and data scientists. (Feng, 2017) Airbnb was voted Glassdoor’s #1 company to work for in 2015. In 2016 Airbnb reorganized their HR department renaming it Employee Experience. The former structure had different divisions for each function of traditional human resources roles. The new structure brought those functions into one department which combined Recruitment, Benefits, Compensation, Diversity,
Culture, Facilities, Safety and even Food Services into one comprehensive department. (Morgan,
2016) Despite the reorganization they dropped to 35th place in 2016. Reasons reported by employees included a loss of growth potential, less communication from management and a decrease in work-life balance. (Kauflin, 2016)
Employment agencies:
Airbnb’s postings are advertised via their webpage. They post positions based on location as well as function. They also recruit at University job fairs most recently focusing on historically black universities and Latino populations.
Unions: Airbnb is a non-union employer.
Financial Resources (Stock markets, banks, private investors):
▪ Stock markets: Airbnb is not publicly traded however they are on the verge of an
IPO (Benner, 2017)
▪ Banks: Airbnb has secured a $1 billion line of credit
▪ Private investors: Airbnb has raised more than $3 billion in venture capital.
Market (Customers, clients, potential users):
Customers: Airbnb has two target clients; hosts and guests. They target hosts that offer entire homes or apartments, private rooms or shared rooms. Their Experience offering includes hosts who are will to offer travel guide specialized experiences.
Guests range from all ages and income levels. They provide options to guests who are looking for the cheapest option and those who want a luxury experience. Millennials make up more than
60% of Airbnb’s users. The senior population is the fast growing demographic.
(Airbnbcitizen.com, 2017)
Potential users: Airbnb has been putting its focus on growing the community in China. They also have been working on establishing a presence in lower income communities.
(Airbnbcitizen.com, 2017)
Technology (Techniques of productions, computers, information technology, e-commerce):
Information Technology: Airbnb has several specialized areas in the Information Technology department.
▪ Global Payment - Airbnb is a licensed money transmitter. They currently used
Braintree however they have recently acquired Tilt which is a payment processing
vendor.
▪ Trust & Safety - Private messaging through their site is the only contact method
until there is a confirmed reservation. Their site also includes reviews and
references for rentals. Airbnb also has an interface with Facebook which allows users to find rentals or hosts who are Facebook friends. Airbnb also provides
features like Verified ID which requires completion on an online profile, online
ID, and email address among other identifying factors.
▪ Search & Discovery - Airbnb built a search algorithm to determine location
relevance. Airbnb launched a Neighborhoods App that allows users to see the
places they are planning to visit. The also developed AirMapView which
incorporates interactive maps for devices.
▪ Messaging & Communication - Airbnb uses Twilio to connect hosts and potential
guests via text messages.
▪ Monetization - Airbnb created a secure payment system. They collect payments
from guests at the time of booking but wait until 24 hours after arrival to release
the funds. Their payment system supports multiple currencies. (Abrosimova, 2017)
E-commerce: Airbnb is an online service provider specializing in hospitality. From researching rentals to aiding in communication with hosts, the site is very easy to use. They also have user friendly mobile applications for iOS and Android users.
Economic Conditions (Recession, unemployment rate, inflation rate, growth):
Recession: Economic recessions will have a minimal impact on Airbnb’s operations. Generally recessions tend to reduce individuals luxury spending, however, a recession may increase
Airbnb’s potential renters who are looking for cheaper options for housing. In addition, a recession may cause homeowners who have not previously listed their home to look to Airbnb as an option to increasing their financial income.
Unemployment rate: Airbnb has continued to hire employees at an exponential rate.
Inflation rate: Inflation will increase the cost of rentals however since Airbnb doesn’t necessarily sell a product there should be minimal impact on their overall operations.
Growth: Airbnb continues to grow. They are purchasing startups as quickly as they emerge.
Most recently they have purchased on online restaurant reservation system, a payment splitting application, and they continue to buy up smaller P2P sharing sites. As long as hosts and guests continue to have positive experiences Airbnb should continue to grow at a steady rate.
Government (City, state, and federal laws, regulations, taxes):
Airbnb is subject to city, state, federal and international laws and regulations. In light of recent legal issues they have created Airbnb Policy Tool Chest which aims to collaborate with lawmakers to establish a beneficial outcome for both parties involved. Since inception they have collected and remitted $110 million in taxes that have been used to fund affordable housing and aid the homeless. They have also worked with government agencies worldwide to draft new laws to enable and increase home sharing opportunities. (Airbnbcitizen.com, 2016)
Sociocultural (Age, values, beliefs, education, religion, work ethic, consumer and green movements): Age: Airbnb provides a platform for users of all ages. Millennials are the highest percentage of
Airbnb users however Airbnb reports high percentages among all demographics. (Airbnbcitizen,
2017)
Values: Airbnb’s mission is to Belong Anywhere and their values are as follows:
1. Champion the mission – Prioritize work that advances the mission and positively
impacts the community.
2. Be a Host – Care, Encourage, Listen and Communicate.
3. Be a Cereal Entrepreneur – Be bold and apply original thinking. Be resourceful.
Airbnb founders raised startup capital by creating and selling cereal boxes
representing Democratic and Republican candidates.
4. Embrace Adventure – Be curious, ask for help and demonstrate ability to grow.
Own and learn from mistakes. (Airbnb.com, 2017)
Culture: Airbnb relies on the premise that all employees not only understand the company values but also embrace the values in their daily lives. Interviews of potential new employees focus on the individuals core values to determine how they have lived these values. They are very true to the core values starting at the interview process. (Clune, 2017) Employees are encouraged to initiate communication and collaboration. Airbnb has open and transparent communication and they empower their managers to have open relationship with their employees. They focus on continual evolution and realize change is necessary in a high growth organization. (Morgan, 2016)
Education: Airbnb has created Data University which consists of online courses for their employees to broaden their knowledge. Work ethic: Airbnb has been ranked as a top employer for employee satisfaction. They allow employees to create their own teams and projects. Employees typically work in excess of a 40 hours per week but continue to report positive work experiences. They have a generous leave program which includes 2 weeks of PTO in addition to two weeks of leave during December.
They are also given a $2000 travel allowance to help subsidize their travel. They even have an onsite dental clinic. (Morgan, 2016)
Consumer Movements: Research shows that consumers are basing their buying based on a company’s social impact. Ninety percent of shoppers are likely to switch to providers that are committed to philanthropy. (Frontstream.com, 2014) Airbnb has a passion for charitable activities. They encourage employees to engage in charitable function and gift employees with community service hours monthly. They also work with shelters, food banks, mentor college students, empower underprivileged women and revitalize abandoned spaces to improve communities. (Airbnbcitizen.com, 2016)
International (Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate):
Competition from and acquisition by foreign firms: Airbnb is already servicing foreign markets. They have acquired several international P2P sharing sites already. It would be unlikely that they would be acquired by a foreign competitor.
Entry into overseas markets: Airbnb is a global organization. They service all continents with the exception of Antarctica.
#2: Is the organization internationally diversified? Yes If yes, where are they currently? Who are their major competitors? What markets should they expand to?
Airbnb has physical locations internationally. Their Worldwide headquarters is located in San
Francisco. Dublin was chosen as the European headquarters and Singapore their Asian headquarters.
Airbnb’s two largest competitors are HomeAway.com and Tripping.com. HomeAway.com has a similar business model as Airbnb and has physical global locations. Their headquarters is located in Austin, TX. (HomeAway.com, 2017) Tripping.com is a search engine that enables the user to get multiple P2P home sharing sites in one search so they can look for the best value. They have relations with all the big players including HomeAway, Roomorama, and Wimdu however they have not partnered with Airbnb to date. (Chan, 2016)
Whether travel sites are acquiring P2P sharing sites or vice versa this appears to be the trend.
With travel platforms such as Expedia, Travelocity, and TripAdvisor already merging with other
P2P providers, they are on trend to become full service booking sites from airfare to lodging to restaurants and tours. Airbnb has purchased a restaurant reservation upstart and Tilt, which is a payment processing upstart. They should look into purchasing an air travel platform if they want to follow suit as a complete travel booking experience.
#3: How complex and unpredictable is the organization's environment?
Which environment does your organization exist in? Airbnb’s service is completely reliant on the amount of P2P home sharing hosts that participate in their service and the number of consumers who choose to use their platform to book. Airbnb has only a few major competitors, and basically offers one service thus their environmental complexity rates low.
Airbnb is currently operating with a low level of predictability. Airbnb is the front runner in P2P sharing sites based on their early entry into the market which has also subjected them to a learning curve based on the unpredictability of a new operating environment. They’ve had to make errors in order to continue to grow. Airbnb has recently dealt with legal issues including the legality of P2P rentals based on country, state and city statutes. Some states have enacted laws that forbid short term rentals. (Farivar, 2017) Laws and regulations are being enacted to curb short term rentals nationwide. Although Airbnb’s Asian headquarters are located in
Singapore, they do not have any rentals available there due to the country’s strict laws regarding short term stays. (Yap, 2013) Airbnb has been able to work out agreements with governments by collecting occupancy taxes and them remitting them on behalf of the host. With this ability governments have eased some of the proposed legislative since it is increasing the state income.
(Airbnb.com, 2017) In addition, Airbnb is exposed to a higher level of unpredictability based on the ability for users to report negative aspects online. When a negative review is posted it has the ability to go viral in a matter of days which could decrease a guest’s or host’s preference in using their site.
Airbnb operates in a simple, unstable environment. While their environmental complexity rates low, the unpredictable nature of the Internet, social media and governmental regulations make external elements hard to predict.
#4: Does your organization’s strategies and goals fit their environment?
Circle one of the types in the following categories that you have found your company to portray: environment, strategy type, and organizational goals.
Airbnb works in a turbulent environment as they are subject to constant innovations in technology and changes to governmental regulations. Airbnb’s concept was based on an innovative idea that was not being offered. They took risks, sought out new opportunities and focused on growth which is in line with a Prospector strategy. However recently they have moved towards an Analyzer strategy which focuses on maintaining their stability while adding new products. For example, they have purchased a restaurant reservation startup (Resy) and a payment splitting startup (Tilt), and most recently a background check company (Trooly).
(Zaleski, 2017) Airbnb also scores high in effectiveness. Their mission of “Belong Anywhere” is the focus of all functions. They emphasize the importance of diversity and inclusion with regards to the patrons they service and individuals they employ. (Airbnb.com, 2017) Airbnb also strives for efficiency by ensuring they have skilled personnel to create applications or acquiring new companies that own the needed technology to meet goals.
#5: Did your organization align across environment, strategy type, and organizational goals? Yes/No
For the most part Airbnb does line up with the Environment, Strategy Types and Organizational goals. Their rapidly changing environment calls for a flexible organic structure which has allowed them to refocus their strategy type from Prospector to Analyzer to align with their organizational goals. Their competitors seem to be morphing into a total travel planning tool.
Airbnb should follow suit however they may be behind the curve. Most travelers book their flights prior to booking lodging which means travelers using booking sites such as Travelocity,
Orbitz or CheapTickets are exposed to information from competing P2P home sharing sites such as HomeAway, FlipKey or Roomorama. People will continue to travel regardless of the economy. Seventy-five percent of Millennials have used home sharing services in the last year and that trend is expected to continue. (Stocki, 2017) As more Millennials enter the market they will be specifically looking for an experience. Airbnb is catering to their needs by recognizing their desire to experience unique experiences with the inception of Experiences. However in order to stay relevant and not get lost among other P2P sites they will need to add some type of air travel booking feature.
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